Investment Securities

Securities designated as available-for-sale are carried at fair value. However, the unrealized difference between amortized cost and fair value of securities available-for-sale is excluded from net income unless there is an other than temporary impairment and it is reported, net of deferred taxes, as a component of shareholders' equity as accumulated other comprehensive income (loss). Securities designated as held-to-maturity are carried at amortized cost, as the Company has the ability, and management has the positive intent, to hold these securities to maturity. Premiums and discounts on securities are amortized and accreted according to the interest method.

Our primary objective in managing the investment portfolio is to maintain a portfolio of high quality, highly liquid investments yielding competitive returns. We are required under federal regulations to maintain adequate liquidity to ensure safe and sound operations. We maintain investment balances based on a continuing assessment of cash flows, the level of loan production, current interest rate risk strategies and an assessment of the potential future direction of market interest rate changes. Investment securities differ in terms of default, interest rate, liquidity and expected rate of return risks.

The following table summarizes the amortized cost and estimated fair value of investment securities and presents the related gross unrealized gains and losses:



September 30, 2015
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-Sale:
Obligations of U.S. government sponsored enterprises	$	2,011	$	8	$	—	$	2,019
Residential mortgage-backed securities-GSE	291,955		631		4,445		288,141
Residential mortgage-backed securities-Private	14,456		631		4		15,083
Commercial mortgage-backed securities-GSE	22,080		68		—		22,148
Commercial mortgage-backed securities-Private	17,879		20		86		17,813
Corporate notes	30,744		9		28		30,725
Total available-for-sale	379,125		1,367		4,563		375,929
Held-to-Maturity:
Residential mortgage-backed securities-GSE	123,735		210		763		123,182
Residential mortgage-backed securities-Private	18,875		—		255		18,620
Commercial mortgage-backed securities-Private	10,060		73		—		10,133
Total held-to-maturity	152,670		283		1,018		151,935
Total investment securities	$	531,795	$	1,650	$	5,581	$	527,864

December 31, 2014
(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-Sale:
Obligations of U.S. government sponsored enterprises	$	2,028	$	16	$	—	$	2,044
Residential mortgage-backed securities-GSE	295,300		438		5,593		290,145
Residential mortgage-backed securities-Private	16,455		820		4		17,271
Commercial mortgage-backed securities-GSE	22,377		—		419		21,958
Commercial mortgage-backed securities-Private	10,365		—		150		10,215
Corporate notes	8,399		8		—		8,407
Total available-for-sale	354,924		1,282		6,166		350,040
Held-to-Maturity:
Residential mortgage-backed securities-GSE	132,396		116		1,635		130,877
Commercial mortgage-backed securities-Private	10,065		—		67		9,998
Total held-to-maturity	142,461		116		1,702		140,875
Total investment securities	$	497,385	$	1,398	$	7,868	$	490,915

As a member of the Federal Home Loan Bank of Atlanta (“FHLB”), the Bank is required to own capital stock in the FHLB based generally upon the balances of total assets and FHLB advances. FHLB capital stock is pledged to secure FHLB advances. This investment is carried at cost since no ready market exists for FHLB stock and there is no quoted market value. However, redemption of this stock has historically been at par value. The Bank owned a total of $5.8 million of FHLB stock at September 30, 2015 and $4.9 million at December 31, 2014. Due to the redemption provisions of FHLB stock, we have estimated that fair value approximated cost and that this investment was not impaired at September 30, 2015. FHLB stock is included in other assets at its original cost basis.

As a member bank of the Federal Reserve Bank of Richmond (“FRBR”), the Bank also is required to own capital stock of the FRBR based upon a percentage of the Bank's common stock and surplus. This investment is carried at cost since no ready market exists for FRBR stock and there is no quoted market value. At September 30, 2015 and December 31, 2014, the Bank owned a total of $9.7 million and $4.7 million of FRBR stock, respectively. Because this investment is in an entity of the U.S. government, we have estimated that fair value approximated the cost and that this investment was not impaired at September 30, 2015. FRBR stock is included in other assets at its original cost basis.

At September 30, 2015, $140.2 million of the investment securities portfolio was pledged to secure public deposits, $17.9 million was pledged to retail repurchase agreements and $162.0 million was pledged to others, leaving $208.5 million available as pledgeable collateral.

The Bank did not sell any investment securities during the three and nine months ended September 30, 2015. During the three and nine months ended September 30, 2014, the Bank sold securities with a book value of $23.9 million and $26.4 million, respectively and recognized gains of $34 thousand and $0.8 million, respectively.

The following tables show our investments' estimated fair value and gross unrealized losses, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2015 and December 31, 2014. The change in unrealized losses during the nine months ending September 30, 2015 was attributed to changes in interest rates and not to changes in the credit quality of these securities. All unrealized losses on investment securities are considered by management to be temporary given the credit quality of these investment securities or the short duration of the unrealized loss, or both.



	Less than 12 Months				12 Months or More				Total
(dollars in thousands)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
September 30, 2015
Available-for-Sale:
Residential mortgage-backed securities-GSE	$	91,601	$	880	$	137,652	$	3,565	$	229,253	$	4,445
Residential mortgage-backed securities-Private	—		—		1,031		4		1,031		4
Commercial mortgage-backed securities-GSE	—		—		—		—		—		—
Commercial mortgage-backed securities-Private	12,564		86		—		—		12,564		86
Corporate Notes	20,328		28						20,328		28
Total available-for-sale	124,493		994		138,683		3,569		263,176		4,563
Held-to-Maturity:
Residential mortgage-backed securities-GSE	45,712		459		36,624		304		82,336		763
Residential mortgage-backed securities-Private	18,621		255		—		—		18,621		255
Commercial mortgage-backed securities-Private	—		—		—		—		—		—
Total held-to-maturity	64,333		714		36,624		304		100,957		1,018
Total	$	188,826	$	1,708	$	175,307	$	3,873	$	364,133	$	5,581

December 31, 2014
Available-for-Sale
Residential mortgage-backed securities-GSE	$	—	$	—	$	245,457	$	5,593	$	245,457	$	5,593
Residential mortgage-backed securities-Private	1,154		4		—		—		1,154		4
Commercial mortgage-backed securities-GSE	—		—		21,958		419		21,958		419
Commercial mortgage-backed securities-Private	—		—		10,215		150		10,215		150
Total available-for-sale	1,154		4		277,630		6,162		278,784		6,166
Held-to-Maturity:
Residential mortgage-backed securities-GSE	—		—		112,878		1,635		112,878		1,635
Commercial mortgage-backed securities-Private	—		—		9,998		67		9,998		67
Total held-to-maturity	—		—		122,876		1,702		122,876		1,702
Total	$	1,154	$	4	$	400,506	$	7,864	$	401,660	$	7,868

At September 30, 2015 and December 31, 2014, there were 17 and 33 available-for-sale securities that were in an unrealized loss position for 12 months or more, respectively.

We analyzed our securities portfolio at September 30, 2015, and considered ratings, fair value, cash flows and other factors to determine if any of the securities were other than temporarily impaired. Since none of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption obligations, and we have determined that it is not more likely than not that we will be required to sell the security before recovery of its amortized cost basis, none of the securities are deemed to be other than temporarily impaired.

The aggregate amortized cost and fair value of securities at September 30, 2015, by remaining contractual maturity, are shown in the following table. Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay the obligations. Mortgage backed securities are grouped based on stated maturity date, but actual maturity will vary based on the actual repayment of the underlying mortgage loans.



	Available-for-Sale				Held-to-Maturity
(dollars in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
U.S. government sponsored agencies
Due in one year or less	$	2,011	$	2,019	$	—	$	—
Residential mortgage-backed securities-GSE
Due after five years through 10 years	1,930		1,984		—		—
Due after ten years	290,025		286,157		123,735		123,182
Residential mortgage-backed securities-Private
Due after ten years	14,456		15,083		18,875		18,621
Commercial mortgage-backed securities-GSE
Due after five years through 10 years	22,080		22,148		—		—
Commercial mortgage-backed securities-Private
Due after ten years	17,879		17,813		10,060		10,132
Corporate notes
Due after one year through five years	30,744		30,725		—		—
Total	$	379,125	$	375,929	$	152,670	$	151,935